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What: Shares of hhgregg (OTC:HGGGQ) were tanking today, closing down 12% after reporting disappointing preliminary holiday sales.
So what: The electronics retailer said yesterday that it estimated sales for the quarter ended Dec. 31 to be $707.4 million, down 11.6% from $799.6 million the year before. Same-store sales plummeted 11.2% as the consumer electronics segment dropped 19.7% though appliances increased 1.5%. CEO Dennis May said, "The third quarter was solidly profitable, but materially below both our expectations and the prior year for diluted earnings per share." May added that the company was a victim of heavy discounting by competitors, a strategy it chose not to follow. Analysts had expected sales of $751.9 million, and an EPS of $0.41 for the quarter.
Now what: Notably, this was the second day of hhgregg's slide, as the stock fell 5% yesterday on the news, and today's sharper decline seems to confirm the urgency in the sales drop. Having comparable sales slide 11% is bad enough in any quarter, but it's even more so in the holiday quarter, when hhgregg was expected to make more than half of its profits for the year. May addressed such concerns, saying that the company has made a "decision to continue to transform our business toward a broader assortment of home products, including appliances and home furnishings." That may mitigate the sales declines in future quarters, but losing the consumer electronics will hurt. And it's no secret where those sales are going. ComScore reported today that online shopping rose 10% in November and December. hhgregg's pain is clearly Amazon.com's gain.